Which Financial Indicator Is Calculated by the Ratio of Market

question 55

Multiple Choice

Which financial indicator is calculated by the ratio of market price per share to earnings per share?

• A) return on investment
• B) price/earnings ratio
• C) return on equity
• D) dividend yield on common stock
• E) dividend payout ratio

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Definitions:

Binary Variable

A variable that takes on one of exactly two possible values, typically represented or coded as 0 and 1.

Processes

A series of actions or steps taken in order to achieve a particular end, often referring to sequences in manufacturing or computation.

Solver

A computational tool used in spreadsheet programs to find optimal solutions to complex decision-making problems by changing multiple variables.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment or project, by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.